Brits courted in arms shake-up

US firms bidding to take over £160bn defence agency want out-sourcing experts on the team

The huge American infrastructure groups looking to run the Ministry of Defence's £160bn programme of buying anti-tank missiles and attack helicopters are wooing British groups to join their teams.

Likely US bidders such as Bechtel, URS, Fluor, and CH2M Hill are trying to convince Serco, Capita, Atkins, and PA Consulting to form consortia. None of the British firms are likely to have the capabilities to bid "in isolation", according to an industry source, but do possess large UK workforces to help support a US-led bid.

FTSE 100 group Serco is particularly prized because of the company's experience in transferring thousands of employees from public- to private-sector employment. This process is expected to be a key factor in an organisational overhaul that critics argue is privatisation by stealth.

The MoD's Bristol-based Defence Equipment & Support division (DE&S) employs around 16,500 people and Serco has previously worked on what is known as the TUPE process across health, transport and education. The Government wants to ensure a smooth transition to private sector control, a move opposed by senior military officers.

The Defence Secretary, Philip Hammond, believes the MoD needs big successful companies to help it get the best deals on the £160bn of equipment it will buy over a decade. He is currently trying to decide between two options for what would be one of the biggest revamps of a government body anywhere in the world.

The first, a "GoCo", would see the private sector have almost complete control over DE&S, while the second option would seek to overhaul it but keep it in the public sector. The MoD has already started a formal process with industry over how a GoCo would work.

Last month, Mr Hammond said: "This programme is about giving them [DE&S staff] access to the necessary skills, processes and resources to enable them to do their jobs better, ensuring the Armed Forces are provided with battle-winning equipment on time and to budget."

He will make his decision in the next 12 months, but is thought to be under pressure from senior defence mandarins to choose the GoCo.